Editor's Note: This is part three in an exclusive series by Dr. Eamonn Butler on the morality of taxation. 

 Most people are willing to make sacrifices to educate their children, look after their elderly relatives, and improve their own job prospects.

But by eating into their financial resources, taxation reduces their ability to do these things – all of which would benefit the community as a whole, not just themselves. Although most of us want individuals and families to take more responsibility for their own lives and welfare, tax makes it harder for them to do so.

Indeed, taxes may convince people that they have no outstanding social obligations at all. We are told that our taxes will pay for vital public services such as education, police and infrastructure. And given the high cost of government services, they may well look at their tax bill and conclude that these services are being plentifully delivered. They conclude that their social obligations have been completely discharged – because they have paid handsomely for the government to do the job.

So they come to believe that it is up to teachers to make sure that their children are literate, numerate and well behaved, and that they need take no responsibility in this. They may believe that welfare programs clear them of any moral duty to help others who might need their help. They may walk on by when they see children being neglected or crime being committed, believing that these are the responsibility of the police and social services that their taxes pay for.

Tax also leaves people with less money to devote to charitable giving. Schools, hospitals, libraries, galleries, orchestras, care homes and other welfare charities have all benefited from the bequests of people who understand their importance to society and humanity; but high rates of lifetime or inheritance taxes inevitably leave people with less to give.

And when people believe that government will provide, they are less likely to fund good causes. A classic example was Britain’s Royal National Lifeboat Institution, which was created independently in 1824, but fell on hard times thirty years later. So in 1854 it accepted £2,000 in government grants. But for every pound the government put in, the RNLI lost thirty shillings (£1.50) in voluntary donations. People could not see why they should support a government-funded institution. So in 1869 the RNLI cut loose again, and has flourished ever since.

---

Eamonn Butler is director of the Adam Smith Institute and author of The Best Book on the Market. In his next piece, he explains how taxation promotes the self-interest of the government authorities.